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What Aristocrat's $3.9 billion Playtech takeover bid means for online gambling

·Finance reporter
·5-min read
People look at electronic pokie machines in a large darkened room. Source: AP
Aristocrat is Australia's and one of the world's largest gambling machine manufacturers. Source: AP

Australian gambling machine manufacturer and global gaming tech business Aristocrat Leisure is making waves across the globe today, thanks to a $3.9 billion takeover bid for Playtech, the world's largest online gaming software supplier.

Aristocrat announced the proposed acquisition to the ASX on Tuesday morning, in a deal that values Playtech at approximately $5 billion.

The deal appears likely to go ahead, with Playtech having already instructed its shareholders to vote in favour of the takeover.

The acquisition has ramifications for the rapidly growing $94 billion online real-money gaming market, with Aristocrat set to become a large player, in addition to its tight grip on physical gambling machines the world over.

The Playtech deal

Aristocrat Leisure’s offer to acquire Playtech values the London-Stock-Exchange-listed online gambling software and content supplier at an enterprise value of $5 billion.

Enterprise value is a measure of a company's total value, including not only its stock market capitalisation - the value of the company’s total issued shares - but also debt and cash on the company's balance sheet.

The Playtech PLC logo seen displayed on a smartphone with the Union Jack flag in the background. Source: Getty Images
Playtech is the world's largest online gaming software supplier. Source: Getty Images

Playtech develops platforms and content for the global gambling industry, with more than 7,000 employees across 24 countries and 170 global licensees.

Playtech shareholders will receive 680 pence per share owned - the equivalent of about $12.50 - which represents a premium of 66 per cent to Playtech’s average share closing price over the past three months. Not a bad deal.

Aristocrat will fund the acquisition through $1.1 billion in existing cash, a $2.75 billion term loan and a $1.3 billion equity raising, giving Aristocrat shareholders an opportunity to invest further.

Who is Aristocrat?

Aristocrat is one of Australia’s largest public companies, with a market capitalisation just shy of $30 billion.

The company describes itself as a “global games powerhouse”; it is licensed in around 300 gaming jurisdictions and operates in more than 90 countries.

The largest gambling machine manufacturer in Australia and by extension one of the world’s largest, Aristocrat also has a range of digital businesses, including Plarium, which owns the very popular role-playing mobile game Raid Shadow Legends, which is spruiked by many YouTubers and has pulled in more than $500 million in lifetime revenue.

What’s behind the deal

What makes Playtech most attractive to Aristocrat is its business-to-business (B2B) gambling operations, which include the design, development and distribution of software and services to the online and in-person gambling industries.

Then there’s the business-to-consumer (B2C) angle. Playtech also operates Italian online retailer Snaitech, as well as other B2C brands, from sports betting to mobile gaming.

Line of electronic pokie machines in a casino. Source: Getty Images
Aristocrat is looking to increase its exposure to the online real-money gaming market, which is worth around $94 billion. Source: Getty Images

Aristocrat CEO and managing director Trevor Croker said the deal would combine Aristocrat’s world-class gaming content and customer and regulatory relationships with Playtech’s global online real-money gaming platform and European B2C footprint.

“The combined group would offer a broad portfolio of end-to-end solutions for gaming customers around the world, as well as seamless player experiences, underpinned by a shared

focus on responsible gameplay and innovation,” he said.

“The recommended offer is a full and fair value and reflects the strategic potential of the combination in a global gaming sector that continues to migrate online, as a result of technology and entrenched consumer-driven change.”

Playtech CEO Mor Weizer said the deal was simply unlocking the “next phase of growth” for the company.

“This deal has the potential to enhance our distribution, our capacity to build new and deeper relationships with partners, and bolsters our technological capabilities,” he said.

“The combination of our two companies builds one of the largest B2B gaming platforms in the world, with the people, infrastructure and expertise to provide our customers with a truly best-in-class offer across all areas of gaming and sports betting."

The rise of online real-money gaming

Aristocrat is looking to increase its exposure to the online real-money gaming market, which is exactly as it sounds - gambling, but online, and for real money.

The online real-money gaming sector is worth around $94 billion.

“The business will be ideally positioned to unlock sustainable shareholder value by seizing opportunities in the fast-growing global online real-money gaming segment as they continue to open up, particularly in North America,” Croker said.

Like just about everything else, the online gaming sector has also seen huge growth due to the COVID-19 pandemic. According to the Australian Institute of Family Studies, 78 per cent of Australian gamblers are spending their money online compared with 62 per cent before COVID-19.

As covered by Yahoo in the past, Australia trumps the US in terms of individual gambling losses every year.

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